Singapore SWF invests in Brazilian sewage

Certainly not Singapore’s GIC. The city state’s sovereign wealth fund has just struck a deal to invest R$300m ($135m) in Aegea Saneamento e Participações, the water and sewage treatment arm of Grupo Equipav, the Brazilian conglomerate.

“Aegea manages an attractive portfolio of water and sewage concessions in Brazil. We are delighted to have Equipav and IFC as our partners and look forward to working with the shareholders and management to help grow the company,” said Tay Lim Hock, president of GIC Special Investments, in a statement on Tuesday.

Aegea could be the first of many Brazilian deals to come for GIC, which manages more than $100bn of Singapore’s reserves. The fund is reportedly planning to open a São Paulo office next year as it looks to ramp up its investment in Brazil.

As Bloomberg reported in June:

The fund is close to a deal to buy a 20 percent stake in BR Towers SA, a Brazilian operator of cellular towers, two people with direct knowledge of the transaction said in March, and it teamed up with its affiliate Global Logistic Properties Ltd. (GLP) and two other state funds in November to buy assets in Brazil for 2.9 billion real ($1.4 billion).

Despite the recent currency volatility and slowing GDP growth, Brazil remains Latin America’s premier fundraising and dealmaking hub. Private equity and venture capital groups invested nearly $2bn in a range of deals in Brazil during the first six months of this year, according to data from the Latin American Private Equity and Venture Capital Association (Lavca). The country accounted for 70 per cent of total deals (value and volume wise) struck in Latin America during the period.

With Brazil looking to spend billions of dollars in the coming years to upgrade the country’s infrastructure – including building new highways, bridges and sewage and drains – GIC is betting that Aegea will benefit from this spending spree.

Aegea recorded net revenues of R$390m last year, a 19.3 per cent increase from the year before. The company currently has a 15 per cent share of the private market operating in 25 municipalities in five states: Mato Grosso, Mato Grosso do Sul, Rio de Janeiro, São Paulo and Santa Catarina, and holds concessions in 23 other municipalities across the country.

Under the terms of the deal, GIC will subscribe to a capital increase in Aegea. Upon the closing of the deal, Aegea’s shareholders will be Equipav, GIC and International Financial Corp, the World Bank’s financing arm.